• Kyodo

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The state-backed Japan Post Bank Co. is considering setting up an investment fund with local financial institutions to support small- and medium-sized companies as it aims to diversify its fund management options, sources close to the matter said Tuesday.

It would enable Japan Post Bank, a unit of Japan Post Holdings Co., local banks and others to invest in or extend loans to small and mid-size companies via the fund. It would also offer them advice on management.

The Financial Services Agency is expected to approve the plan, the sources said.

A senior agency official said, “It would be desirable for Japan Post Bank to focus mainly on managing and selling investment trusts.”

The move comes at a time when low interest rates have eroded the profitability of the loans business for Japanese banks. Small and mid-size companies are seeking investors willing to extend financial support.

Japan Post Bank, which is scheduled to go public in November as part of the government’s drive to privatize the postal services, has been managing massive postal savings by minimizing their risk exposure.

Under the plan, Japan Post Bank is expected to put up less than 1 percent of its roughly ¥180 trillion in assets for the newly created fund. It will limit the size of individual loans to the order of tens of millions of yen, the sources said.

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